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What is your credit score? Some auto insurance companies want to know:



What is your credit score Some auto insurance companies want

An increasing number of insurance companies in Nova Scotia are looking to use credit information as a factor in determining how much customers pay for auto insurance, a practice that is not without controversy.


Opponents say it will punish people who are in a vulnerable financial condition through no fault of their own, while proponents say it could cut rates for those with good credit.

In February, Aviva Insurance Company of Canada and Traders General Insurance Company received approval from the Nova Scotia Utility and Review Board to use “credit information” as a factor in determining a customer’s premium. The decision does not specify whether that information is a credit score or a credit report.

The decision said both companies are already using credit information to assess homeowner policies in Nova Scotia and elsewhere. It said customers cannot be required to provide credit information and they cannot be denied insurance if they decline. However, they “may get a better rate if this information is provided,” the decision said.

Insurers can raise premiums

The decision won’t stop insurance companies from increasing premiums if a customer declines a credit check.


Paul Allen, executive director of the UARB, said that if some car owners in a certain “pool” of policyholders agree to credit checks and receive a discount because of a good score/report, others in the pool may be required to pay the shortfall that the insurance company needed to achieve the return on investment.

He said that if insurance companies want to introduce a surcharge for those who do not want credit checks, they must apply to the UARB for approval.

Three other insurers in Nova Scotia, all part of the TD Insurance Group, were authorized in 2018 to use credit information in determining auto insurance rates.

Three other insurance companies, Intact, Allstate and Pembridge, recently asked the UARB to use credit information as a factor in determining auto insurance rates.

“There is a risk when you say ‘No’. There is a risk when you say ‘Yes’. So consumers have to weigh that risk because it translates into how they will be perceived as a risk with that insurance company,” said Amanda Dean, Atlantic Vice President of the Insurance Bureau of Canada, which represents insurance companies.


Higher risk of claims

The review committee’s decision stated that Aviva and Traders believe credit information is “risk-predictive” and that the companies have provided confidential information to support their belief. The board ruled that the proposed use of credit information “is not subjective or arbitrary and is reasonably related to the risk taken by the companies”.


CARP, which considers itself Canada’s largest advocacy group for older Canadians, disagrees.

“There is no solid foundation for relying on credit checks to approve auto insurance for homes or cars,” said Bill VanGorder, CARP’s Nova Scotia spokesperson.

He said there are many reasons why people have low credit scores that have nothing to do with their honesty or ability to manage their insured properties. He said health is the main reason.

“There are a lot of people with health care problems who end up spending a lot of money on health care because they don’t.” [all] covered by the government. It could be low income reasons because they have a steady income, which hasn’t increased in years. None of these indicate a lack of trustworthiness in a senior,” he said.

He worries about seniors with diminished credit scores because those factors will get higher premiums, even though they still pose “no higher risk to insurers.”

What is your credit score? Some auto insurance companies want to know:
Bill VanGorder, CARP’s Nova Scotia spokesperson, said his group is against using credit information when calculating auto insurance rates. (Robert Short/CBC)

Not all insurance companies in Nova Scotia use credit information when determining auto insurance rates, and VanGorder urges seniors undergoing credit checks to talk to a broker who will look for a company that doesn’t need it.

The use of credit information in determining private auto insurance premiums has been banned in Newfoundland and Labrador since 2011. It’s also banned in Ontario, although the Ford government has indicated in this year’s budget that this could change.

Alberta prohibits the use of credit information when setting basic auto insurance rates, but allows its use for additional coverages, such as collision and extended coverage.

On Prince Edward Island, there is nothing in the law that prevents auto insurers from using credit information as long as the customer agrees. However, a spokesperson for the Island Regulatory and Appeals Commission, which regulates auto insurance, said it does not know of any company that uses credit scores as a rating factor.

In New Brunswick, the government passed legislation to prevent credit checks in 2011, but it was never enacted. Marie-Claude Doucet, chairman and CEO of the New Brunswick Insurance Board, said in an email that no insurer in the province currently uses credit scores as a risk factor for auto insurance, and none have proposed doing so.

Companies in that county, like many others, have used credit scores for home insurance.


Concerns about the vulnerable

The Insurance Brokers Association of Ontario issued a statement in February about the possibility of using credit scores in auto policies, noting that the use has been a source of controversy.

While insurers say it helps them assess risk because a good credit score indicates someone is more responsible, aware of repairs and doing regular maintenance, reducing the likelihood of an accident, the association is concerned.

“With the use of credit scores on the automotive product, the most vulnerable consumers in society could be further disadvantaged,” it said, pointing out that the practice “could negatively impact the availability and price offered to those who least afford insurance in the first place.”

It identified these as people with low or no credit scores, retired seniors, newcomers to Canada, unemployed single-income families, and small business owners using lines of credit.

What is your credit score? Some auto insurance companies want to know:
Amanda Dean, Atlantic vice president at the Insurance Bureau of Canada, said allowing a credit check could lead to a lower premium for those with good scores. (Patrick Callaghan/CBC)

Dean, of the Insurance Bureau of Canada, said a number of insurance companies have agreed to follow the organizations’ code of conduct on the use of credit information.


It includes the possibility of a customer with a low credit score asking their insurer to account for “extraordinary living conditions” so that the person is not unduly penalized by a low credit score. It is up to the customer to make the request and provide documentation to support its claim. The code identifies an extraordinary life event as “identity theft or a catastrophic event as declared by provincial authorities.”

In an interview, Dean cited divorce and illness as other reasons that can temporarily affect a credit score.

In 2010, after insurance companies began using credit information as a factor in determining home insurance premiums, CBC’s consumer affairs report found: marketplace found several people whose premium doubled as a result.

At the time, the Co-operators, the largest Canadian-owned insurance company, said in written correspondence that “the credit score simply reflects a person’s level of responsibility and conduct when it comes to managing their financial obligations.”

Credit checks can negatively impact a person’s creditworthiness, but Dean said the credit check used by insurance companies is a “soft one” that doesn’t affect a person’s creditworthiness. She couldn’t explain what a “soft” check is and instead referred CBC to individual insurance companies to ask the question.

Aviva and Traders approved for walks

Aviva rejected a CBC request and declined to answer questions. It said its stance is “in line” with that of the Insurance Bureau of Canada. However, the agency said it cannot speak for individual insurance companies and is somehow not taking a position.


In addition to implementing the use of credit information, Nova Scotia’s Utility and Review Board has approved an overall increase of 10.5 percent for Aviva and 14.4 percent for merchants and scrapped some customer discounts.

There will no longer be a driver training credit for main drivers, but for occasional drivers. A five percent discount for vehicles equipped with aftermarket anti-theft devices has been scrapped.

The Aviva group has also stopped offering a five percent loyalty discount that applied to people who had a policy for at least three years. In addition, there is no longer a 10 percent discount for people who bundle their home and car insurance and who have been an occasional driver for less than nine years.

Some insurance companies offer discounts to people who drive less because of COVID-19.

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